Corporate Stock-Transfer Restriction and Certificate-Legend Requirements in Colorado

At a glance

Requirements one by one

Authorized records and earlier-issued shares

Colorado Revised Statutes § 7-106-208(1) permits a restriction in the articles of incorporation, the bylaws, an agreement among shareholders, or an agreement among shareholders and the corporation. The same subsection gives four routes for a restriction to affect an earlier-issued share: the holder acquired with knowledge, joined the agreement containing the restriction, voted for the restriction, or otherwise consented.

For this section, “shares” includes a security convertible into or carrying a right to subscribe for or acquire shares (§ 7-106-208(5)). The statute states no separate renewed-assent rule for a later amendment, so the actual instrument, holder record, and transaction history still control that question.

Permitted purposes and restriction forms

Section 7-106-208(3) authorizes restrictions used to maintain a corporate status dependent on shareholder number or identity, preserve an entitlement, benefit, or exemption under federal, state, or local law, or serve another reasonable purpose.

The permitted forms are a first offer to the corporation or other people; an obligation for the corporation or other people to acquire the shares; approval by one or more people, including the corporation or holders; and a prohibition involving designated people or classes. The offer and acquisition routes may operate separately, consecutively, or simultaneously. Approval and designated- person terms must not be manifestly unreasonable (§ 7-106-208(4)).

The surveyed provision does not separately prescribe an ownership percentage cap, automatic-transfer mechanism, purchase price, valuation formula, funding method, or remedy.

Certificate and uncertificated-share notice

An authorized restriction is valid and enforceable against the holder or the holder's transferee when its existence is noted conspicuously on the front or back of the certificate or included in the written information statement for uncertificated shares. Without that notice, the restriction is not enforceable against a person without knowledge (§ 7-106-208(2)).

Section 7-106-207 lets the board authorize uncertificated shares unless the bylaws provide otherwise. Existing certificated shares remain certificated until surrendered. Within a reasonable time after issuing or transferring an uncertificated share, the corporation must send the shareholder a written statement containing the applicable restriction information.

What trips people up

Colorado has a broader earlier-share route than a party-or-vote rule. A holder's acquisition with knowledge or other consent can also make a later restriction affect an earlier-issued share. That gate remains separate from the certificate or information-statement notice governing enforcement against a later person (§ 7-106-208(1)-(2)).

A lawful purpose does not supply the transaction mechanics. Preserving a federal, state, or local entitlement, benefit, or exemption is authorized, but the restriction itself must supply any ownership, trigger, acquisition, price, and process terms within the statute's limits.

The corporate notice is not a universal securities legend. The statute's entitlement, benefit, and exemption language does not replace federal or state restricted-securities notices, UCC Article 8 rules, intermediary procedures, or transfer-agent requirements.

Common questions

May a Colorado restriction appear in the bylaws?

Yes. Section 7-106-208(1) expressly names the bylaws, along with the articles and the two shareholder-agreement routes. The earlier-share knowledge, agreement, vote, or consent gate still applies.

May Colorado require the corporation to buy restricted shares?

Yes. Section 7-106-208(4)(b) permits a restriction obligating the corporation or other people, separately, consecutively, or simultaneously, to acquire the shares. It does not set the trigger, price, valuation method, funding, or remedy.

Does the statute reach convertible securities?

Yes. Section 7-106-208(5) includes a security convertible into or carrying a right to subscribe for or acquire shares.

Can Colorado shares be issued without certificates?

Yes. Section 7-106-207 permits board authorization unless the bylaws provide otherwise, preserves existing certificates until surrender, and requires the written information statement after an uncertificated issuance or transfer.

Statutes and sources

• C.R.S. § 7-106-208(1)-(2) — authorized records, earlier-share knowledge or assent, conspicuous certificate or information-statement notice, and holder/transferee enforcement. Official Colorado Revised Statutes Title 7 printout, accessed August 26, 2026.
• C.R.S. § 7-106-208(3)-(5) — authorized purposes, enumerated forms, manifest-unreasonableness limits, and covered convertible or subscription- right securities. Official Colorado Revised Statutes Title 7 printout, accessed August 26, 2026.
• C.R.S. § 7-106-207(1)-(2) — board authorization of uncertificated shares, surrender of existing certificates, and the written information statement. Official Colorado Revised Statutes Title 7 printout, accessed August 26, 2026.